Bridging the gap between entrepreneurship teaching and economics.

Author:McCaffrey, Matthew
  1. Introduction

    It is well known that entrepreneurship is one of the fastest-growing disciplines in management and the social sciences. Entrepreneurship courses are currently in high demand in business schools, which are increasing their research and teaching emphasis on entrepreneurial behavior in order to meet rising curiosity about new venture creation, small business management, and innovation (Kuratko 2005; Prior 2014). Unfortunately, there has been little interaction between entrepreneurship education and economics. While entrepreneurship programs do invoke economic concepts, few seek to seriously explain the economic context in which entrepreneurship happens. This lack of communication can be attributed to the narrow focus of entrepreneurship studies; specifically, the type of entrepreneurship taught in business schools tends to emphasize creating new businesses rather than the broader economic and social implications of entrepreneurship (Klein 2008; National Survey of Entrepreneurship Education 2014). Nevertheless, studying new ventures leads naturally to an interest in the entrepreneur's significance for society generally. As I will show, entrepreneurship students have much to gain by incorporating such discussions into their studies.

    This paper explains how entrepreneurship teaching can supplement typical coursework with a series of readings emphasizing the economic and social significance of enterprise. I argue that complementing undergraduate entrepreneurship courses with learning materials from economics encourages a fuller understanding of the social forces at work in business creation and innovation, while still allowing students space to pursue practical knowledge about how entrepreneurs launch new ventures. The paper is organized as follows: Section 2 explains the general benefits to students of incorporating economics into entrepreneurship education. Section 3 then outlines a series of readings instructors can use to deepen students' economic understanding of the entrepreneurial process, and describes a general narrative that the readings convey.

  2. The Economic Function of Entrepreneurship

    Market entrepreneurship takes place within the context of exchange relations, or what Ludwig von Mises called "catallactics." It is therefore a fundamentally economic activity. Given this fact, it is only natural that economics would be relevant for the study of entrepreneurship. However, it is difficult to understand the potential benefits to students of combining these topics without first recognizing the limitations of standard entrepreneurship courses. A significant problem in entrepreneurship education is that students learn many details of the process of new venture creation, but relatively little of the greater significance of entrepreneurial activity in society. In Klein's (2008) terminology, business courses tend to focus on "occupational entrepreneurship" rather than "functional entrepreneurship."

    Entrepreneurship teaching does emphasize the importance of new and small businesses in the national economy, and usually nods in passing to concepts like Schumpeterian creative destruction. Yet, it includes hardly any analysis of the "big picture," or what is sometimes called "systems-level" thinking in entrepreneurship (McMullen and Shepherd 2006). Specifically, it lacks a discussion of the entrepreneur's economic function: the unique activity or process entrepreneurs engage in that reflects their special role in society. This function provides a rigorous social science foundation for studying entrepreneurship in practice; without it, students often learn to spot the new venture trees, while ignoring the economic forest.

    This trend is changing as entrepreneurship teaching broadens its scope to include topics like social, cultural, and political entrepreneurship. These subfields help to explain the diverse forms entrepreneurial behavior takes, as well as its power to transform society in ways that extend beyond the marketplace. In addition, classroom entrepreneurship is placing new emphasis on different versions of traditional enterprise, such as green entrepreneurship, sustainable business, "conscious capitalism," and so on, all of which encourage students to consider goals besides strict profit maximization. However, these approaches often lack an appreciation of economics. Students tend to get confused in two ways, both of which can be overcome by exploring the entrepreneur's economic function. First, while teaching often discusses, for instance, the benefits of social enterprise for communities and economies, the benefits of "ordinary" market entrepreneurship are often left unexplained. This may be because conventional profit-seeking is insufficiently recognized as a driving force in social change, or it might simply be because it seems more mundane than trendier topics such as green technology, entrepreneurial social activism, or corporate social responsibility. Whatever the reason, vital economic ideas about institutions, uncertainty, profit and loss, and so on are neglected. A second and related problem is that these fashionable types of entrepreneurship are often viewed as substitutes for the usual activity of the market economy rather than complements, implying that "ordinary" entrepreneurship is economically or ethically suspect.

    Fortunately, economic ideas can help clarify misunderstandings about the socially beneficial nature of market entrepreneurship. Specifically, an economic approach dispels confusion by providing a more complete framework within which to study entrepreneurial behavior. Instead of explaining new venture creation as such, economics helps students to understand its social context. What follows is a list of source materials intended not only to increase students' knowledge of economics, but also to encourage them to see that even small entrepreneurial acts are part of a much larger process of social change and progress that is brought about by, and mutually reinforces, the free choices of individuals.

    Recommended Readings on the Economic and Social Context of Entrepreneurship

    * William J. Baumol, "Entrepreneurship: Productive, Unproductive, and Destructive"

    * Sun Tzu, The Art of War (selections)

    * Bert F. Hoselitz, "The Early History of Entrepreneurial Theory"

    * Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can't Explain the Modern World (selections)

    * Joseph A. Schumpeter, Capitalism, Socialism, and Democray (selections)

    * Murray N. Rothbard, Man, Economy, & State: Scholar's Edition (selections)

    * Frank H. Knight, "Profit and Entrepreneurial Functions"

    * Frank A. Fetter, Economic Principles and Problems (selections)

    * Ludwig von Mises, "Profit and Loss"

    * Ludwig von Mises, Human Action: Scholar's Edition (selections)

    * F. A. Hayek, "Competition as a Discovery Procedure"

    * Israel M. Kirzner, "The Perils of Regulation: A Market-Process Approach" (selections)

    The complete list of readings includes both classic works in economics as well as newer research, and draws heavily on the writings of the Austrian school. To keep the discussion as accessible as possible to both students and instructors, I have focused on sources that are available online free of charge. Teachers can use the readings either to supplement current courses or to build new ones; however, while individual readings can be applied to specific topics in pre-existing courses, the complete list was initially conceived...

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